Product mix strategies Product mix, also known as product assortment, refers to the total number of product lines

that a company offers to its customers. For example, a small company may sell multiple lines of products. Sometimes, these product lines are fairly similar, such as dish washing liquid and bar soap, which are used for cleaning and use similar technologies. Other times, the product lines are vastly different, such as diapers and razors. The four dimensions to a company's product mix include width, length, depth and consistency. There are four stages in the life cycle of a product: introduction, growth, maturity, and decline. The stage a product is in helps determine marketing strategy. In the introductory stage, consumer awareness and acceptance of the new product are limited, sales are zero, and profits are negative because of research and development expenses for the product. Marketers focus on making consumers aware of the product and its benefits during the introductory stage. Sales increase rapidly and profits peak during the growth stage, then start to decline as new companies enter the market, driving prices down and increasing marketing expenses. During the growth stage, the firm tries to strengthen its position in the market by emphasizing the product's benefits and identifying market segments that want these benefits. Sales continue to increase at the beginning of the maturity stage, but then the sales curve peaks and starts to decline while profits continue to decline. This stage is characterized by severe competition and heavy marketing expenditures. During the decline stage, sales continue to fall rapidly, and profits decline and may become losses as prices are cut and necessary marketing expenditures are made. Branding, packaging, and labeling identify or distinguish one product from others and thus are key marketing activities that help position a product appropriately for its target market. Branding is the process of naming and identifying products. Identification may occur through a brand (a name, term, symbol, design, or combination that identifies a product and distinguishes it from other products), a brand name (the part of the brand that can be spoken and consists of letters, words, and numbers), a brand mark (the part of the brand that is a distinctive design), and/or a trademark (a brand that is registered). Two major categories of brands are private distributor brands and manufacturer brands. Manufacturer brands are initiated and owned by the manufacturer to identify products from the point of production to the point of purchase. Private distributor brands, which may be less expensive than manufacturer brands, are owned and controlled by a wholesaler or retailer. Generic products have no brand name at all. Marketers may give each product within its complete product mix its own brand name or develop a family of brands with each of the firm's products carrying the same name or at least part of the name.

The packaging, or external container that holds and describes the product, influences consumers' attitudes and their buying decisions. A package can perform several functions, including protection, economy, convenience, and promotion. Labeling, the presentation of important information on the package, is closely associated with packaging. The content of labeling, often required by law, may include ingredients or content, nutrition facts, care instructions, suggestions for use, the manufacturer's address and toll-free number, and other useful information. Quality reflects the degree to which a good, service, or idea meets the demands and requirements of customers. Quality has become a key means for differentiating products in consumers minds.

Inflation Accounting

Inflation accounting A method of accounting that, unlike historical-cost accounting, attempts to take account of the fact that a monetary unit (e.g. the pound sterling) does not have a constant value; because of the effects of inflation, successive Alteration of a firm's financial statements to account for changes in the purchasing power of money. With inflation accounting, gains and losses from holding monetary items during periods of changing prices are recognized. Likewise, long-term assets and liabilities are adjusted for changing price levels. Inflation accounting is used to supplement regular financial statements in order to illustrate how changing price levels can affect a firm. Also called general price level accounting. Inflation Accounting and its significance

The impact of inflation comes in the form of rising prices of output and assets. As the financial accounts are kept on Historical cost basis, so they don't take into consideration the impact of rise in the prices of assets and output. This may sometimes result into the overstated profits, under priced assets and misleading picture of Business etc.

So, the financial statements prepared under historical accounting are generally proved to be statements of historical facts and do not reflect the current worth of business. This deprives the users of accounts like management, shareholders, and creditors etc. to have a right picture of business to make appropriate decisions.

Hence, this leads towards the need for Inflation Accounting. Inflation accounting is a term describing a range of accounting systems designed to correct problems arising from historical cost accounting in the presence of inflation.

The significance of inflation accounting emerges from the inherent limitations of the historical cost accounting system. Following are the limitations of historical accounting: 1. Historical accounts do not consider the unrealized holding gains arising from the rise in the monetary value of the assets due to inflation. 2. The objective of charging depreciation is to spread the cost of the asset over its useful life and make reserve for its replacement in the future. But it does not take into account the impact of inflation over the replacement cost which may result into the inadequate charge of depreciation. 3. Under historical accounting, inventories acquired at old prices are matched against revenues expressed at current prices. In the period of inflation, this may lead to the overstatement of profits due mixing up of holding gains and operating gains. 4. Future earnings are not easily projected from historical earnings.
Techniques of Inflation Accounting Current Purchasing Power (CPP) Method

Current Cost Accounting (CCA) Method

Limitations of Inflation Accounting

Though Inflation Accounting is more practical approach for the true reflection of financial status of the company, there are certain limitations which are not allowing this to be a popular system of accounting. Following are the limitations:

1. Change in the price level is a continuous process. 2. This system makes the calculations a tedious task because of too many conversions and calculations. 3. This system has not been given preference by tax authorities.

HR Accounting

Human resource Accounting is the process of identifying and reporting the Investments made in the Human Resources of an Organisation that are presently not accounted for in the conventional accounting practices. In simple terms, it is an extension of the Accounting Principles of matching the costs and revenues and of organising data to communicate relevant information in financial terms.
Approaches to HR Accounting

Cost Approach This approach is also called as acquisition cost model. This approach is developed by Brummet, Flamholmay tz and Pyle This method measures the organizations investment in employees using the five parameters: recruiting, acquisition; formal training and, familiarization; informal training, Informal familiarization; experience; and development. this model suggest instead of charging the costs to p&l accounting it should be capitalized in balance sheet. This method is the only method of human resource accounting which is based on sound accounting principals and policies. Replacement Cost approach This approach measures the cost of replacing an employee. According to Likert (1985) replacement cost include recruitment, selection, compensation, and training cost (including the income foregone during the training period). The data derived from this method could be useful in deciding whether to dismiss or replace the staff. Present Value of future earnings

Lev and Schwartz (1971) proposed an economic valuation of employees based on the present value of future earnings, adjusted for the probability of employees death/separation/retirement. This method helps in determining what an employees future contribution is worth today. According to this model, the value of human capital embodied in a person who is y years old, is the present value of his/her future earnings from employment and can be calculated by using the following formula: E(Vy) = Py(t+1) I(T)/(I+R)t-y

where E (Vy) = expected value of a y year old persons human capital T = the persons retirement age Py (t) = probability of the person leaving the organisation I(t) = expected earnings of the person in period I R = discount rate.

Value to the organization

Hekimian and Jones (1967) proposed that where an organization had several divisions seeking the same employee, the employee should be allocated to the highest bidder and the bid price incorporated into that divisions investment base. For example a value of a professional athletes service is often determined by how much money a particular team, acting in an open competitive market is willing to pay him or her.

Expense model
According to Mirvis and Mac, (1976) this model focuses on attaching dollar estimates to the behavioral outcomes produced by working in an organization. Criteria such as absenteeism, turnover, and job performance are measured using traditional organizational tools, and then costs are estimated for each criterion. For example, in costing labor turnover, dollar figures are attached to separation costs, replacement costs, and training costs

CVP analysis

Cost-volume-profit analysis (CVP), or break-even analysis, is used to compute the volume level at which total revenues are equal to total costs. When total costs and total revenues are equal, the business organization is said to be "breaking even." The analysis is based on a set of linear equations for a straight line and the separation of variable and fixed costs. Total variable costs are considered to be those costs that vary as the production volume changes. In a factory, production volume is considered to be the number of units produced, but in a governmental organization with no assembly process, the units produced might refer, for example, to the number of welfare cases processed. There are a number of costs that vary or change, but if the variation is not due to volume changes, it is not considered to be a variable cost. Examples of variable costs are direct materials and direct labor. Total fixed costs do not vary as volume levels change within the relevant range. Examples of fixed costs are straight-line depreciation and annual insurance charges. Total variable costs can be viewed as a 45 line and total fixed costs as a straight line. In the break-even chart shown in Figure 1, the upward slope of line DFC represents the change in variable costs. Variable costs sit on top of fixed costs, line DE. Point F represents the breakeven point. This is where the total cost (costs below the line DFC) crosses and is equal to total revenues (line AFB).

All the lines in the chart are straight lines: Linearity is an underlying assumption of CVP analysis. Although no one can be certain that costs are linear over the entire range of output or production, this is an assumption of CVP. To help alleviate the limitations of this assumption, it is also assumed that the linear relationships hold only within the relevant range of production. The relevant range is represented by the high and low output points that have been previously reached with past production. CVP analysis is best viewed within the relevant range, that is, within our previous actual experience. Outside of that range, costs may vary in a nonlinear manner. The straight-line equation for total cost is: Total cost = total fixed cost + total variable cost Total variable cost is calculated by multiplying the cost of a unit, which remains constant on a perunit basis, by the number of units produced. Therefore the total cost equation could be expanded as: Total cost = total fixed cost + (variable cost per unit number of units) Total fixed costs do not change. A final version of the equation is: Y = a + bx where a is the fixed cost, b is the variable cost per unit, x is the level of activity, and Y is the total cost. Assume that the fixed costs are $5,000, the volume of units produced is 1,000, and the perunit variable cost is $2. In that case the total cost would be computed as follows: Y = $5,000 + ($2 1,000) Y = $7,000 It can be seen that it is important to separate variable and fixed costs. Another reason it is important to separate these costs is because variable costs are used to determine the contribution margin, and the contribution margin is used to determine the break-even point. The contribution margin is the difference between the per-unit variable cost and the selling price per unit. For example, if the per-unit variable cost is $15 and selling price per unit is $20, then the contribution margin is equal to $5. The contribution margin may provide a $5 contribution toward the reduction of fixed costs or a $5 contribution to profits. If the business is operating at a volume above the break-even point volume (above point F), then the $5 is a contribution (on a per-unit basis) to additional profits. If the business is operating at a volume below the break-even point (below point F), then the $5 provides for a reduction in fixed costs and continues to do so until the break-even point is passed. Once the contribution margin is determined, it can be used to calculate the break-even point in volume of units or in total sales dollars. When a per-unit contribution margin occurs below a firm's break-even point, it is a contribution to the reduction of fixed costs. Therefore, it is logical to divide fixed costs by the contribution margin to determine how many units must be produced to reach the break-even point: Assume that the contribution margin is the same as in the previous

example, $5. In this example, assume that the total fixed costs are in creased to $8,000. Using the equation, we determine that the break-even point in units:

In Figure 1, the break-even point is shown as a vertical line from the x-axis to point F. Now, if we want to determine the break-even point in total sales dollars (total revenue), we could multiply 1600 units by the assumed selling price of $20 and arrive at $32,000. Or we could use another equation to compute the break-even point in total sales directly. In that case, we would first have to compute the contribution margin ratio. This ratio is determined by dividing the contribution margin by selling price. Referring to our example, the calculation of the ratio involves two steps: Going back to the break-even equation and replacing the per-unit contribution margin with the contribution margin ratio results in the following formula and calculation: Figure 1 shows this break-even point, at $32,000 in sales, as a horizontal line from point F to the yaxis. Total sales at the break-even point are illustrated on the y-axis and total units on the x-axis. Also notice that the losses are represented by the DFA triangle and profits in the FBC triangle. The financial information required for CVP analysis is for internal use and is usually available only to managers inside the firm; information about variable and fixed costs is not available to the general public. CVP analysis is good as a general guide for one product within the relevant range. If the company has more than one product, then the contribution margins from all products must be averaged together. But, any cost-averaging process reduces the level of accuracy as compared to working with cost data from a single product. Furthermore, some organizations, such as nonprofit organizations, do not incur a significant level of variable costs. In these cases, standard CVP assumptions can lead to misleading results and decisions.